'We don't pay taxes. Only little people pay taxes,' announced Leona Helmsley, the fabulously wealthy widow of a New York property tycoon. Helmsley was dubbed the queen of mean. Now, it seems, big business is taking a leaf out of her book.

In what could be one of the most significant legal disputes in recent British corporate history, more than 40 of the UK's most powerful firms are preparing to take the beleaguered Inland Revenue to Europe's Court of Justice to recoup billions of pounds in tax.

If successful, the group action could seriously affect Gordon Brown's spending plans. And it would be yet another vivid example of how multinationals run rings around the Revenue by avoiding tax with the help of armies of highly paid tax planners.

In the wake of the tax debate re-ignited by the suggestion of Peter Hain, the Leader of the Commons, that it was unreasonable for middle-income earners to pay the same top rate as the super-rich, one thing has been overlooked: multinational businesses are already successfully cutting the amount of tax they pay.

This latest dispute focuses on whether or not it is justifiable to offset losses incurred elsewhere in the EU against profits made in Britain. Many of the companies involved wish to remain anonymous but one firm alone is seeking damages in excess of £250 million, say accountants on the case.

Marks & Spencer is the prime mover. Its case concerns £100m of losses accumulated in three European subsidiaries over four years. M&S is trying to claw back £30m it paid the Revenue in the mid-Nineties by offsetting those losses against its UK profits. This action is heading towards EU legislature after the Revenue said it would not appeal against a High Court decision to refer it to the Court of Justice in Luxembourg.

Riding in the giant retailer's slipstream are the 40 or so other UK businesses.

'It will have massive significance, not just in Britain but across Europe,' said Peter Cussons, PricewaterhouseCooper's international tax partner, who is advising some of the firms. 'The claim will be in the order of £1bn in this country. There will be other actions not just in the UK but in the Netherlands, Germany and France.'

This dispute comes as the average level of corporation tax in the world's 30 richest countries has been seen to plunge - from 37.5 per cent to 30.8 per cent between 1996 and 2003, according to a survey last month by accountants KPMG.

KPMG used the research to urge the Treasury to lower Britain's 30 per cent rate, saying the UK's competitive advantage in attracting inward investment was at risk. But the research tellingly indicated that as corporation tax rates plummet the burden will increasingly fall on individuals and small businesses - the little people.

Reduced levels of corporation tax are not just caused by lower levels of economic growth. Big business is footloose and bases itself in low-tax environments.

Rupert Murdoch's main British holding firm, Newscorp Investments, paid no net corporation tax in the UK throughout the Nineties and it is highly likely, although unconfirmed, that it still does not. Sir Richard Branson's Virgin Group is based in the Caribbean, yet Virgin Rail has had £500m in public subsidy over the past year.

A leading accountancy expert, Professor Prem Sikka, estimates that £25bn is lost to the Treasury each year through multinationals basing themselves in low-tax envi ronments. 'The precise figure is impossible to work out. Some say it could be as much as £80bn. We don't know because the Treasury refuses to undertake detailed research to get accurate estimates. It is dodging the issue.'

Possibly the most serious tax avoidance technique is transfer pricing, a murky area where purchases and sales take place within the same company. Items are sold from high-tax environments to low ones, so the tax burden is dramatically reduced.

A recent study estimated that the US Treasury lost $175bn (£107bn) of tax revenues in this way between 1998 and 2001. It is unknown how much the UK Treasury has lost.

Labour MP Austin Mitchell said: 'Around 60 per cent of world trade takes place within multinationals, giving them enormous scope for fixing the prices of intra-company transfers. Armies of accountants are available to legitimise any phantasmagorical figure they can think of. Indeed, the big accountancy firms devise the schemes, audit them, then say the accounts are true and fair.'

The Treasury says that since 1997 more than 40 anti tax-dodging measures have been introduced. In the last Budget it introduced a compliance and enforcement package worth £66m over three years, which, it says, will produce new revenue of £1.6bn. And a new agreement by European finance ministers will crack down on unregulated tax havens.

But sceptics say the Revenue is dramatically under-resourced and losing the war against tax avoidance. According to its latest annual report, its investigators recovered £3.8bn in unpaid tax last year, down from £4.8bn in 2001 and £5.5bn in 2000.

Much of this decline is blamed on the large-business department, which clawed back £600m less than in 2001.

A high-profile Treasury measure to allow information exchange among banks has been criticised for only affecting individuals, not firms, trusts or charities

Three years ago, the Organisation for Economic Co-operation and Development said that businesses flying offshore were stifling overall economic growth. But it is argued that the political will to tackle this issue is not there.

'It's essential that business pays its way, it's the glue in the social contract. But multinationals play one country against another in the search for a low-tax environment. In the developing world, society breaks down,' said Steve Tibbett, head of campaigns at War on Want. He added that if business was saying it was socially responsible it had a duty not to avoid tax.

'Look at those funding political parties and the [business] advisers packing into Whitehall and Washington,' said John Christensen, a former economic adviser to Jersey. 'They are setting the agenda. No wonder there is little conviction in fighting this.'

Those arguing for reform call for either a global tax authority to snuff out tax competition, or for firms to be taxed wherever they make their profits. And there are the beginnings of a movement advocating international accounting standards. But this would require G8 agreement.

Only when public spending plans are severely compromised or the tax burden on 'little people' becomes intolerable will big business really come under pressure to pay its way.